Q1 FY'11 Financial Statements in .pdf Format

Dell today said as a result of ongoing discussions with the staff of the U.S. Securities and Exchange Commission (SEC), the company recorded a $100 million liability in its first quarter of Fiscal 2011 to establish a reserve for the potential settlement by the company of the previously reported SEC investigation. The settlement would involve a civil injunctive action against the company for alleged violations of certain federal securities laws, including the antifraud provisions of federal securities laws, relating to certain accounting and financial reporting matters. The settlement would also include negligence-based fraud charges, as well as other non-fraud based charges, relating to the company’s disclosures and alleged omissions prior to Fiscal 2008 regarding certain aspects of its commercial relationship with Intel Corp.

In addition, the company reported that Michael Dell, Chairman and CEO, and the SEC staff have recently commenced discussion of a settlement framework relating to Mr. Dell that would resolve allegations relating to the company’s disclosures and alleged omissions prior to Fiscal 2008 regarding certain aspects of the company’s commercial relationship with Intel Corp. Any such settlement by Mr. Dell would involve alleged violations of negligence-based fraud provisions of the federal securities laws, as well as other non-fraud based provisions, and would not include any bar against Mr. Dell’s service as an officer and director of a public company. Any settlement would be made without admitting or denying the SEC’s allegations.

“We are hopeful that these settlement discussions will achieve a comprehensive resolution in the near future. The independent directors of the Board have affirmed that Michael Dell will continue to lead the company as its Chairman and CEO, and he continues to have our complete confidence and support” said Sam Nunn, presiding director of the Dell Board.

The investigation of the company began in 2005. In response, Dell undertook an independent investigation, completed in 2007, which led to a restatement of certain historical financial reports and implementation of extensive remedial measures.

Because this latest development in Dell’s discussions with the SEC staff occurred before Dell filed its Quarterly Report on Form 10-Q for its first quarter of Fiscal 2011, the company revised its previously announced financial results and recorded a liability for the potential settlement involving the company. The Form 10-Q report for the company’s first fiscal quarter was filed today.

As a result of the liability recorded, the company’s net income on a GAAP basis for the first quarter of Fiscal 2011 has been reduced by $100 million, or 5 cents per share. Results on a non-GAAP basis did not change.

The following table summarizes the revised results for the first quarter of Fiscal 2011 and provides a comparison to the first quarter of Fiscal 2010: 

                                                First Quarter

(in millions, except share data) FY11      FY10    Change 
 Revenue $14,874     $12,342     21%
 Operating Income (GAAP) $519     $414     25%
 Net Income (GAAP) $341     $290     18%
 EPS (GAAP) $0.17     $0.15     13%
 Operating Income (non-GAAP) $824     $638     29%
 Net Income (non-GAAP) $584     $486     20%    
 EPS (non-GAAP $0.30     $0.25     20%

Information about Dell’s use of non-GAAP financial information is provided under “Non-GAAP Financial Measures” below. Non-GAAP financial information excludes costs related to the amortization of purchased intangibles, severance and facility-action costs, acquisition-related charges and accruals for a potential settlement with the SEC as well as a provision for settlement of securities class-action litigation. All comparisons in this press release are year over year unless otherwise noted.

Discussions concerning the potential settlements involving the company and Mr. Dell are ongoing. No assurance can be given as to when any settlement might occur or as to the final terms and conditions of any settlement. Any settlement recommended by the SEC staff would be subject to approval by the Commission.

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Non-GAAP Financial Measures:
This press release includes information about non-GAAP gross margin, non-GAAP operating expenses, non-GAAP operating income, non-GAAP net income, and non-GAAP earnings per share (collectively the “non-GAAP financial measures”), which are not measurements of financial performance prepared in accordance with U.S. generally accepted accounting principles. In the following tables, Dell has provided a reconciliation of each non-GAAP financial measure to the most directly comparable GAAP financial measure under the heading “Reconciliation of Non-GAAP Financial Measures” and has presented a detailed discussion of its reasons for including the non-GAAP financial measures and the limitations associated with those measures under the heading “Use of Non-GAAP Financial Measures.” Dell encourages investors to review the reconciliation and the non-GAAP discussion in conjunction with Dell’s presentation of these non-GAAP financial measures.

Forward-looking Statements:
Statements in this press release that relate to future results and events (including statements about a potential settlement of the SEC investigation) are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and are based on Dell's current expectations. Actual results and events in future periods may differ materially from those expressed or implied by these forward-looking statements because of a number of risks, uncertainties and other factors, including that Dell can give no assurance as to the ultimate outcome of the SEC investigation, when any settlement with the SEC might occur, the terms or conditions of any settlement, or the potential impact of any resolution of this matter on Dell’s business, as well as the other risks and uncertainties discussed in Dell’s filings with the Securities and Exchange Commission, including its Annual Report on Form 10-K for its fiscal year ended January 29, 2010. Dell assumes no obligation to update its forward-looking statements.

Revised consolidated statements of income, financial position and cash flows and other financial data follow.
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